When Comparing the Loanable Funds and Liquidity Preference Frameworks of Interest

question 38

Multiple Choice

When comparing the loanable funds and liquidity preference frameworks of interest rate determination,which of the following is true?

• A) The liquidity preference framework is easier to use when analyzing the effects of changes in expected inflation.
• B) The loanable funds framework provides a simpler analysis of the effects of changes in income, the price level, and the supply of money.
• C) In most instances, the two approaches to interest rate determination yield the same predictions.
• D) All of the above are true.
• E) Only A and B of the above are true.

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Definitions:

Horizontal Décalage

A term from Piaget's theory of cognitive development, describing the variability in a child’s understanding and application of concepts across different situations.

Conservation

Understanding that physical properties do not change when appearance changes, crucial in cognitive development, repeating definition with emphasis on its role in cognitive science.

Preoperational Stage

A phase in Jean Piaget's cognitive development theory where children from ages 2 to 7 engage in symbolic play and struggle with logic and taking the perspective of others.

Three Mountains Task

A cognitive development test designed by Jean Piaget to assess children's ability to understand and appreciate different perspectives and viewpoints.